Quick answer
ON Semiconductor (branded onsemi) produces power and sensing semiconductors, with a strategic focus on silicon carbide (SiC) power devices for EV traction inverters and industrial power systems. SiC offers higher efficiency and power density than traditional silicon transistors at the voltages used in EV drivetrains and industrial motor drives, making it increasingly preferred for next-generation power electronics. SOX member. Central question: Can onsemi preserve SiC pricing and margins as EV demand cycles and competitors enter the market?
Investor takeaway: Onsemi's investment case depends on silicon carbide becoming the dominant power semiconductor technology in EV drivetrains, which is largely already happening, and on onsemi maintaining pricing and margin leadership as Wolfspeed, STMicroelectronics and others expand SiC capacity. The valuation discount or premium relative to peers reflects the market's assessment of how durable onsemi's SiC position is through a period of capacity expansion and EV demand volatility.
Company at a glance
| Company | ON Semiconductor Corporation (onsemi) |
|---|---|
| Ticker | ON |
| Sector | Information Technology |
| Industry | Power and sensing semiconductors |
| Core customers | EV OEMs and Tier 1 automotive suppliers, industrial drives and energy customers, solar and EV charging system makers, data-center power suppliers |
| Primary economic drivers | SiC content per EV traction inverter, EV production volumes, industrial motor drive demand, ADAS camera content per vehicle |
| Key investor metrics | SiC revenue growth, long-term supply agreement coverage, gross margin trajectory, SiC fab utilization, EV production forecasts from key customers |
| Major peer set | Wolfspeed (SiC specialist), STMicroelectronics, Infineon Technologies, Renesas Electronics (power overlap) |
What onsemi actually does
Power Solutions and SiC focus. Silicon carbide MOSFETs and diodes for EV traction inverters, industrial motor drives, renewable energy (solar inverters and EV charging stations) and power supplies. SiC devices switch at higher voltages and frequencies than traditional silicon IGBTs while generating less heat per watt converted, improving system efficiency and reducing cooling requirements. Every EV traction inverter requires power transistors, and the transition from silicon IGBTs to SiC MOSFETs is the key generational shift. Onsemi is one of three leading suppliers (alongside STMicro and Wolfspeed) targeting this transition.
Intelligent Sensing. Image sensors for advanced driver assistance systems (ADAS) cameras used to detect lanes, pedestrians and other vehicles. Industrial machine vision sensors, medical imaging and consumer camera applications. ADAS camera sensors require high dynamic range (seeing in both sunlight and shadow simultaneously) and low-noise performance. As ADAS content per vehicle increases from single cameras to multiple camera systems, the total addressable market expands.
Industrial Power and Legacy Silicon. Discrete silicon IGBTs and intelligent power modules for industrial motor drives, HVAC equipment, home appliances and industrial power supplies. This established business generates consistent cash flow and customer relationships while SiC ramps. Traditional silicon will coexist with SiC in applications where operating voltages or switching frequency requirements do not justify the SiC cost premium.
The SiC manufacturing investment. SiC is harder to process than silicon, requiring specialized substrate materials, epitaxy and fab equipment. Onsemi has invested significantly in SiC substrate and device manufacturing capacity, including its Hudson, New Hampshire and East Fishkill, New York sites. Vertical integration (making SiC substrates in addition to devices) is intended to improve cost structure and supply security compared with buying substrates from Wolfspeed or other suppliers.
Why silicon carbide matters for EVs
Electric vehicle traction inverters convert battery DC power to the AC power that drives electric motors. The inverter switches power transistors at tens of kilohertz while managing hundreds of volts and hundreds of amps. Silicon IGBTs (insulated gate bipolar transistors) have been the standard power transistor for this application, but their switching losses limit efficiency and require larger cooling systems.
SiC MOSFETs switch at 10 times higher frequency with significantly lower switching losses than silicon IGBTs at the same voltage. In an EV traction inverter, this translates to several real benefits: smaller and lighter inverters (because smaller heat sinks are needed), better system efficiency (extending range per charge by 5 to 10%), and the ability to reduce the overall cost of the power electronics system by simplifying thermal management. These benefits are most valuable at the 400V to 800V bus voltages used in modern EVs.
The transition from silicon to SiC is not hypothetical. Most major EV OEMs have committed to SiC-based traction inverters for their next-generation platforms. The question for investors is which SiC suppliers capture the most revenue from this transition, at what pricing, and with what margins.
Long-term supply agreements
Onsemi has signed long-term supply agreements (LTAs) with major EV OEMs committing SiC supply over multiple years. These agreements provide revenue visibility by establishing minimum purchase commitments, locking in pricing frameworks and giving both parties confidence to make investment decisions. From onsemi's perspective, LTAs justify the capital expenditure required to expand SiC capacity.
LTAs carry risks as well as benefits. If EV production volumes undershoot the commitments embedded in the LTA (because of slower-than-expected EV adoption, OEM production problems or competitive displacement), customers may reduce purchase volumes below committed levels or seek to renegotiate pricing. Onsemi's LTA coverage is a key metric, but the quality of the underlying demand behind those LTAs is equally important.
Key risks
- EV demand volatility. Slower-than-expected EV adoption in key markets reduces SiC traction inverter demand. Consumer reluctance, charging infrastructure limitations, interest rate effects on vehicle affordability and competitive dynamics among EV OEMs all affect the timing and volume of EV production.
- SiC oversupply. As Wolfspeed, STMicroelectronics, Infineon and others expand SiC capacity simultaneously, total industry supply may exceed demand growth, putting pressure on SiC pricing and margins. Capacity expansions made at the peak of EV enthusiasm could arrive at a time of slower EV adoption.
- Customer insourcing. Some large EV OEMs with sufficient volume (Tesla, BYD) have explored or implemented in-house SiC production. If insourcing becomes more widespread, it would reduce the addressable market for merchant SiC suppliers.
- Industrial power demand cycle. Onsemi's industrial power and legacy businesses are cyclical. A prolonged slowdown in capital spending on industrial equipment, HVAC or renewable energy installations would reduce revenues from these segments while SiC capacity investments continue.
- Manufacturing utilization. Onsemi's SiC fabs require high utilization to earn adequate returns on the capital invested. If demand softens while capacity is being added, utilization falls and gross margins compress.
Valuation framework
Onsemi is most naturally analyzed as a sum-of-parts: SiC power, ADAS imaging, and legacy silicon power. Each segment has different growth rates, margins, competitive intensity and capital intensity. The SiC segment deserves a growth multiple; the ADAS sensing segment a stable-growth multiple; the legacy power segment a mature-business multiple.
The SiC segment valuation is sensitive to three variables: EV production volumes over the next five years, onsemi's market share within the SiC traction inverter market, and the average selling price per vehicle of SiC content. A scenario tree that varies these three inputs produces a wide range of outcomes. The midpoint of a reasonable scenario range and the current enterprise value yield the implied return.
Return on invested capital is the key long-run profitability metric given the capital intensity of SiC manufacturing. Compare onsemi's ROIC trajectory to the cost of capital to assess whether SiC expansion is creating or consuming value.
Frequently asked questions
What does ON Semiconductor (onsemi) make?
ON Semiconductor, branded onsemi, designs and manufactures power semiconductors and sensing devices. Its core strategic product is silicon carbide (SiC) power MOSFETs and diodes used in electric vehicle traction inverters, industrial motor drives, solar inverters and EV charging equipment. Onsemi also makes image sensors for automotive ADAS cameras and industrial machine vision, and traditional silicon power devices for industrial and consumer applications.
Is ON Semiconductor in the SOX index?
ON Semiconductor Corporation is a constituent of the PHLX Semiconductor Sector index (SOX). SOX membership reflects onsemi's classification as a semiconductor company and its market capitalization. Index constituents are reviewed periodically and can change at reconstitution events. The current constituent list should be verified with the index provider.
What is silicon carbide and why does it matter for EVs?
Silicon carbide (SiC) is a semiconductor material with superior electrical properties compared with standard silicon at high voltages and temperatures. SiC power transistors can switch electricity on and off at higher frequencies with lower energy losses than silicon IGBTs, which are the traditional power transistor used in electric vehicle traction inverters. In an EV, SiC inverters convert battery DC power to the AC power that drives the electric motor. Using SiC reduces switching losses, allows smaller heat sinks, and improves the vehicle's range per charge by 5 to 10%. These benefits make SiC the preferred technology for 400V and 800V EV drivetrains.
How does onsemi compete in silicon carbide power?
Onsemi competes in the SiC power market primarily through three elements: long-term supply agreements (LTAs) with EV OEMs that provide revenue visibility and customer commitment, vertical integration in SiC substrate and device manufacturing that is intended to reduce cost and improve supply security, and a broad product portfolio spanning SiC devices, gate drivers and power modules that allows onsemi to offer complete power stage solutions. The main competitors are Wolfspeed (a SiC specialist), STMicroelectronics and Infineon Technologies, all of which are expanding SiC capacity for the EV market.
What is a long-term supply agreement in semiconductors?
A long-term supply agreement (LTA) in semiconductors is a multi-year contract between a semiconductor supplier and a customer (typically an automotive OEM or Tier 1 supplier) that establishes committed purchase volumes, pricing frameworks and delivery expectations over a defined period. LTAs were widely used in the EV supply chain to secure SiC capacity during a period of tight supply. They give the supplier confidence to invest in new manufacturing capacity and give the customer supply assurance. LTAs typically include minimum purchase commitments from the customer and capacity reservation commitments from the supplier. They carry risk for both parties if market conditions change significantly during the contract period.
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Sources and research methodology
Primary sources:
Editorial update rule: refresh this page after annual filings, material changes to SiC capacity plans or long-term supply agreements, index membership changes, or any event that materially changes how onsemi makes money. Short-term market prices should come from a timestamped market-data component rather than being hard-coded into this evergreen article.